RP Baking LLC v. Bakery Drivers & Salesmen Local 194

RP BAKING LLC, Plaintiff,

v.BAKERY DRIVERS AND SALESMEN LOCAL 194 AND INDUSTRY PENSION FUND and its TRUSTEES, Defendants.

Civil Action No.: 10-3819 (ES)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

DATED: March 30, 2012

NOT FOR PUBLICATION

OPINION

SALAS, DISTRICT JUDGE

I. Introduction

Pending before this Court is RP Baking LLC's ("RP") motion to dismiss Bakery Drivers and Salesmen Local 194 and Industry Pension Fund and its Trustees' (the "Fund") First Amended Counterclaim. The Court has jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. §§ 1132 and 1451, Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Court has reviewed the parties' submissions in connection with the motion and decides it without oral argument under Fed. R. Civ. P. 78(b). For the following reasons, the Court DENIES RP's motion, and Counts I, II, and III in the Amended Counterclaim survive.

II. Background

The Fund alleges that it is a multiemployer pension plan within the meaning of §§ 3(37) and 4001(a)(3) of ERISA, 29 U.S.C. § 1002(37) and 1301(a)(3). The individual Trustees of the fund are "fiduciaries" with respect to the Fund as defined in § 3(21)(A) of ERISA, 29 U.S.C. § 1002(21)(A), and are collectively the "plan sponsor" within the meaningof § 4001(a)(10)(A) of ERISA, 29 U.S.C. § 1301(a)(10)(A). Under §§ 502(a), 4221(b)(1), and 4301(a)(1), 29 U.S.C. §§ 1132(a), 1401(b)(1), and 1451(a)(1), the Fund filed this Amended Counterclaim on behalf of the Fund, its participants, and beneficiaries for the purpose of collecting withdrawal liability. (Am. Counterclaim ¶¶ 3-7, D.E. 46).

The Fund alleges that until the date of its withdrawal from the Fund in June 2006, Pechter's Baking Group, LLC ("Pechter's") employed workers represented for the purposes of collective bargaining by the Bakery Drivers and Salesmen Local 194, which later merged into the International Brotherhood of Teamsters Local 701. (Id. ¶ 9, 11). Pechter's was signatory to a collective bargaining agreement ("CBA") with Local 701, under which Pechter's was required to make contributions to the Fund on behalf of its employees. (Id. ¶ 12). Via an asset purchase agreement ("APA"), RP purchased the assets of Pechter's relating to Pechter's manufacture, sale, and distribution of baked goods, on or about June 26, 2006. (Id. ¶ 17). The Fund alleges that, in the APA, RP agreed to assume Pechter's collective bargaining agreement with Local 701, and began making contributions to the Fund on behalf of its employees. (Id. ¶ 18).

The Fund determined that, in June 2006, Pechter's effected a "complete withdrawal" from the Fund under § 4203 of ERISA, 29 U.S.C. § 1383. (Id. ¶ 13). The Fund also determined that as a result of Pechter's withdrawal, Pechter's incurred withdrawal liability to the Fund in the amount of $5,440,183, as determined under § 4201(b) of ERISA, 29 U.S.C. § 1381(b). (Id. ¶ 14). On or about November 16, 2007, Pechter's received a demand for payment of withdrawal liability issued by the Fund in accordance with §§ 4202(2) and 4219(b)(1) of ERISA, 29 U.S.C. §§ 1382(2) and 1399(b)(1). The demand also contained a withdrawal liability payment schedule. (Id. ¶¶ 15-16).

On or about January 6, 2010, RP received a demand for payment of withdrawal liability issued by the Fund in accordance with §§ 4202(2) and 4219(b)(1) of ERISA, 29 U.S.C. §§ 1382(2) and 1399(b)(1), informing RP that as the successor to Pechter's, RP was liable for Pechter's withdrawal liability of $5,448,183, payable in a single payment or in 39 quarterly payments of $184,982, which included a final payment of $147,286. (Id. ¶ 61). RP requested plan sponsor review of the withdrawal liability assessment by letter dated February 22, 2010. (Id. ¶ 62). By letter mailed on May 21, 2010, the Fund denied all aspects of RP's request for review. (Id. ¶ 63). By letter dated and received July 23, 2010, RP initiated arbitration of the withdrawal liability assessments. (Id. ¶ 64).

Two allegations are at the core of the Fund's Amended Counterclaim. First, under Count I, the Fund alleges that RP, as successor-buyer, is liable for the withdrawal liability of Pechter's, as predecessor-buyer. (Id. Count I ¶¶ 70-74).¹ Second, and more critically for purposes of this Opinion, the Fund alleges that, based on the above dates, and given the 60-day timeline for initiating arbitration under § 1401(a)(1)(A), RP untimely requested arbitration, cannot request it now, and is therefore stuck with the payments and schedule set forth by the Fund in its demand. The focus of Count II is RP's alleged $1,005,674 of withdrawal liability related to RP's own withdrawal in October 2008, for which the Fund assessed a liability of $1,005,674 against RP in a demand letter received by RP on or about January 6, 2010. (Am. Counterclaim Count II ¶¶ 75-87). Finally, in Count III the Fund requests declaratory relief, alleging that, because of RP's untimely arbitration request, RP is precluded from challenging the Fund's assessments andschedules for payment against RP for Pechter's and for RP's own withdrawal. (Id. Count III ¶¶ 88-92). The Court includes additional facts below, where relevant to the issues discussed.

III. Legal Standards

A. Rule 12(b)(6)

For a complaint to survive dismissal, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In determining the sufficiency of a complaint, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). But, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions[;][t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S. Ct. at 1949.

B. Withdrawal and Successor Liability

ERISA is designed "to protect plan participants and their beneficiaries." Einhorn v. M.L. Ruberton Constr. Co., 632 F.3d 89, 96 (3d Cir. 2011) (citations omitted). The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") addresses "the adverse consequences that result when individual employers terminate their participation or withdraw from multiemployer pension plans." Id. (citing Supervalu, Inc. v. Bd. of Trs., 500 F.3d 334, 336 (3d Cir. 2007)). The MPPAA requires an employer who withdraws from a multiemployer pension plan to pay withdrawal liability, which represents the fund's "unfunded vested benefits." 29 U.S.C. §§ 1381, 1382(3), 1399(b)(1)(B). The plan sponsor first determines if the employer has withdrawn. 29 U.S.C. § 1381. Next, the plan sponsor will notify the employer of the amount of the allegedwithdrawal liability. 29 U.S.C. §§ 1382(2), 1399(b)(1)(A)(i). After notification, within ninety days, the employer may seek a review of the amount. 29 U.S.C. § 1399(b)(2)(A)(i). If any dispute remains, either party may initiate arbitration. 29 U.S.C. § 1401(a)(1). If neither party initiates arbitration, then the amounts immediately become due and owing and subject to collection. 29 U.S.C. § 1401(b)(1).

Under the theory of successor liability, "a purchaser of assets may be liable for a seller's delinquent ERISA fund contributions to vindicate important federal statutory policy where [1] the buyer had notice of the liability prior to the sale and [2] there exists sufficient evidence of continuity of operations between the buyer and seller." Einhorn, 632 F.3d at 99 (adopting the Seventh Circuit's rule in Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323 (7th Cir. 1990)). "The inquiry should be effectuated on a case by case basis balancing the equities presently before the court." Id.²

IV. Discussion

A. Count I—Claim Against RP for Pechter's Withdrawal: Successor Liability

Where relevant, the Court incorporates its Opinion denying the parties' cross motions for summary judgment (i.e, the Opinion denying D.E. 43 and D.E. 51). In that Opinion, the Court found that the Fund had not satisfied its burden on summary judgment, but the survival standard on a motion to dismiss is, of course, different. To survive RP's motion to dismiss Count I, the Amended Counterclaim need only "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 570). Here, Count I satisfies that standard.

The first element of a successor liability claim in the ERISA context is that "the buyer had notice of the liability prior to the sale." Einhorn, 632 F.3d at 99. In this Court's July 18, 2011 Opinion, it held:

[The Fund] ha[s] not pled any facts to support its contention that [RP] had notice of Pechter's withdrawal liability. [The Fund] merely pled that [RP] had "prior notice of the possibility of Pechter's withdrawal liability" without further factual support. Although [the Fund] pled that [RP] had knowledge of Pechter's obligations under the collective bargaining agreement, it did not specifically tie those obligations to withdrawal liability to give [RP] fair notice of the support for [the Fund's] claims. Finally, although the Court agrees that [RP's] disclaimer of such liability is relevant, the Court cannot find where [the Fund] pled those facts in the Counterclaim.

RP Baking LLC v. Bakery Drivers & Salesmen Local 194 (RP Baking I), No. 10-3819, 2011 WL 2912861, at *4 (D.N.J. July 18, 2011). The Court finds that the Fund has now cured those deficiencies.

The Fund's core allegation is that "RP had notice of Pechter's obligations to the Fund prior to its purchase of Pechter's assets as a result, inter alia, of its assumption of Pechter's collective bargaining agreement with Local 701 under the APA," (Am....